Amid escalating Middle East conflicts, crude oil surged overnight with WTI (July) rising $3.07 to $74.84/bbl and Brent (August) gaining $3.22 to $76.45/bbl. Driven by cost pressures and specific market news, polyester raw materials PX, PTA, and MEG futures also posted significant gains recently. With rising costs, PET fiber chip prices-already suffering persistent losses-followed upward. Transaction price for semi-dull and bright chip was settled around 6,030-6,100 yuan/mt and 6,050-6,100yuan/mt-both up 125yuan/mt day on day. However, the increases lagged behind cost growth, compressing processing spreads to 114 and 129yuan/mt-hitting new annual lows.

Despite record-low processing spreads, downstream speculative demand remained weak with muted market activity. Two factors explain this: 1. downstream chip spinning plants still hold substantial chip inventories, limiting immediate needs. 2. poor terminal orders have made buyers cautious about speculative purchases.

 

After Israel's strike on Iran early Friday (June 13), geopolitical risks escalated, sending crude prices soaring and lifting PTA/MEG futures. PET fiber chip prices rose sharply but couldn't match cost increases, deepening cash flow losses. Amid severe losses and Iran-Israel conflict concerns, downstream spinning plants released concentrated speculative demand, stocking PET fiber chips mostly for late-month use, driving massive PET fiber chip transactions. Today, despite new lows in processing spreads, purchasing enthusiasm paled compared to Friday because spinning plants still hold chip inventories, reducing urgency for prompt procurement.

 

Notably, while upstream markets surged, terminal polyester demand remains weak-prices struggle to follow. Recent small-scale production cuts at terminals have created downstream pressure. Spinning plants thus remain cautious about chasing chip prices and may even reduce output if excessive costs further compress spreads, mitigating future inventory devaluation risks.

Going forward, short-term markets may continue reacting to Middle East tensions. With processing spreads at record lows and severe losses, some recovery is possible. PET fiber chip prices could find near-term support but have limited upside unless conflicts escalate further-as current geopolitical risks appear largely priced in.